MetroGlass says it could have communicated better as sales growth slowed

Metro Performance Glass, whose shares have tumbled 57 percent in the past 12 months, says it could have communicated better as sales growth slowed and its full-year guidance is conservative as befits a stock that has fallen out of favour.

The Auckland-based company's shares rose 5.7 percent to 93 cents on the NZX today after the company posted a 2.6 percent gain in first-half profit to $11.8 million as sales jumped 22 percent to $141.7 million.The earnings gain was driven by a full six-month contribution from Australian Glass Group, acquired last year for A$43.1 million.

New Zealand sales edged up 0.4 percent to $112 million while earnings before interest, tax, depreciation and amortisation fell 10 percent to $21.4 million. Australian sales were $29.6 million, compared with $4.6 million for a single month contribution a year earlier and ebitda rose to $3.9 million from $800,000. 

In the first half of 2016, sales climbed 23 percent on New Zealand trading alone but as the company said today, in the latest six months anticipated growth in NZ residential and commercial construction activity "did not eventuate, contributing to a disappointing financial result in NZ." The construction sector faced constraints because of reduced housing affordability and availability of credit, a difficult winter, capacity constraints and uncertainty over the elections, it said.

MetroGlass has about 55 percent of New Zealand's glass market but says competition and weaker-than-expected construction activity meant the company was "entering a period of more moderate growth". As a result, last month it announced a strategic review assisted by First NZ Capital, which is expected to be completed by March 2018. MetroGlass had geared up for stronger growth "but now in recognition of softer than expected conditions, steps have been taken to improve efficiency and capital expenditure plans have been revised," it said today.

Capex for 2018 is now expected to be $20 million, down from a previous estimate of $25 million, and annual capex over the next two years is expected to slow to a range of $10 million to $12 million. 

"Planned capex over the next quarter will set MetroGlass up well for FY19 and this is in line with the board's commitment to prudent capital management," said chair Peter Griffiths, who took over from retiring chair John Goulter today.

Chief executive Nigel Rigby said much of this year's $20 million capex will be spent over December and January, typically a slow time for the construction industry. Among investments will be an expansion of its double glazing plant in Auckland to allow for panels as large as 6x3 metres, anticipating greater uptake of double glazing in commercial projects, and also allowing "exotic, high-performance glass".

MetroGlass kept its full-year profit forecast broadly unchanged in a range of $18.5 million to $20 million, from $19.4 million last year. Rigby said when a company's stock has fallen out of favour with the market "you have to make sure your guidance is conservative." The company had taken "some learning about how well we have communicated our growth strategy," Rigby said.

The company will pay an interim dividend of 3.6 cents a share, unchanged from a year earlier, on Jan. 23 with a record date of Jan. 9. 

(BusinessDesk)